2024 Q1 Economic Indicator
Contrary to earlier predictions of a recession in early 2024, the AIA and FMI now suggest a potential slowdown in the back half of 2024. While our indicators do point to a deceleration, our internal data and anecdotal evidence consistently demonstrate the robustness of the construction industry, which does not align with the notion of a significant downturn.
To summarize the AIA and FMI reports, they expect an increase in construction spending between 2-3% in 2024, followed by a rise of 1% in 2025. Accounting for the anticipated slowdown of construction over the next two years, the AIA points to three factors that, when combined, cause banks to tighten up lending, resulting in difficulty in getting projects started:
- Rising long-term interest rates.
- Higher construction input costs with input prices remaining 35% to 40% higher than pre-pandemic rates.
- Construction labor costs are continuing to rise at a 4% annual pace.
Despite the AIA Billing Index remaining below 50 for 9 consecutive months and the Dodge Momentum Index staying low for the past 10 months, the Charlotte and Columbus construction markets are still brimming with potential. Contractor backlogs, as measured by ABC and FMI, saw an increase at the end of Q1. This positive trend is mirrored at Miles-McClellan, where our backlog is higher today than it was at the end of Q1.
As you read the full report, you will learn more details about these numbers and trends.
Recent MM Bidding Experience
Immediately below is a summary from one recent bid effort, but it indicates what our teams are experiencing as they continue to price projects for our clients actively.
Sharing a recent bidding experience, Brad Bloomberg, MM Vice President, expressed, “Our most recent bid was for a local office remodel in downtown Columbus. The project primarily focuses on updating elevator lobbies, restrooms’ finishes, lighting, and ceilings. We had a prequalified list of limited subcontractors invited to the project. While the coverage was average on drywall and fire suppression, we received feedback from painters, electricians, and HVAC contractors that they were too busy with the existing backlog over the summer months to take on any new work.”
- Painting: 2 bidders of the 7 invited.
- Electrical: 2 bidders of the 10 invited.
- HVAC: 1 bidder of the 10 invited.
- Flooring: 2 bidders of the 6 invited.
- Drywall & Demo: 4 bidders of the 5 invited.
- Fire Suppression: 3 bidders of the 6 invited.
This level of bidding activity is typical for the summer months. We will monitor the trends and report on contractor backlogs in Q3.